Actual capital expenditure, including accruals, amounted to R56 billion. This includes
R30 billion (US$2,1 billion) relating to the LCCP. The higher LCCP capital cash flows and
significant impairments recorded increased our gearing to 56,3%, which is above our
previous market guidance of 44 – 49%.
We continue to actively manage the balance sheet with the objective of maintaining a robust
liquidity position and a balanced debt maturity profile. Active balance sheet management will
remain a key ongoing focus during this peak gearing phase.
During 2019, we refinanced the US$4 billion LCCP asset-based facility in two phases,
initially by the issue of US$2,25 billion of US dollar-denominated bonds and thereafter by a
US$1,8 billion 5-year bank loan financing (with a net debt: EBITDA covenant of 3,0 times).
The US dollar bond issue was Sasol’s first such issuance since the inaugural US$1 billion
10-year bond issued in 2012. The issuance comprised a US$1,5 billion 5,5-year bond and a
US$0,75 billion 10-year bond. This refinancing enabled Sasol to optimise our mix of funding
instruments between bank loans and bond market, while at the same time extending the
maturity of the debt profile from 2021 to as far out as 2028. An additional benefit of
refinancing away from asset-based security was that S&P re-rated the 2012 bond back to
the same investment grade level as Sasol Limited. The US$1,8 billion bank loan was closed
in June 2019.
As part of the refinancing, we agreed with our lenders to amend the net debt: EBITDA
covenant from 2,5 times to 3,0 times under the US$3,9 billion Revolving Credit Facility
entered into in 2017. Our net debt: EBITDA at 30 June 2019 was 2,6 times, with the banks
definition of net debt: EBITDA expected to range between 2,2 and 2,4 times, which remains
well below the covenant.
In addition, in the domestic South African market, we have both bank loan facilities, and the
R8 billion Domestic Medium Term Note Programme (DMTN) which was established in 2017.
In August 2019 Sasol issued our inaugural paper to the value of R2,2 billion in the local debt
market under the DMTN programme.
Another key element of financial market risk management is our hedging programme. We
continue to make good progress with hedging our currency and ethane exposure. For further
details of our open hedge positions we refer you to our Analyst Book (www.sasol.com). We
will continue to hedge our net cash exposures for our balance sheet for 2020 and 2021 and
will reduce our cover ratios once we are satisfied with the balance sheet’s gearing levels.
In line with our capital allocation framework, we continue to hold a long-term commitment to
maintain our investment grade credit ratings.
Dividend
After careful consideration of our current leverage and the volatility in the macroeconomic
environment, the Board has made the decision to pass the final dividend to protect and
strengthen our balance sheet. We continue to ensure that we deliver the key elements of our
strategy, particularly the final completion of the LCCP. The Board may further consider the
passing of the 2020 interim dividend based on the health of the balance sheet credit metrics
at that stage.